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Scotland and the new private rented sector: Part 2

This is the second of two blog posts providing an overview of the 1st Annual Scottish Housing Policy Conference. In part one we noted, among other things, that Britain has been at the extreme end of short-term tenancies and insecurity for tenants, but recent reforms aim to address this in Scotland; that there is growing interest among institutional investors in the private rented sector (PRS); that the rental market is not homogenous but segmented into discrete submarkets; and, that we need much better data for monitoring the PRS in Scotland. In this, part two, we return to these themes as we provide an overview of the four parallel sessions from the conference.

First, Nick Bailey and Mark Livingston (Urban Big Data Centre) ran a session on evidence and data for monitoring the PRS in Scotland. Nick began by examining data from the Scottish Household Survey, drawing on a sample of 220,000 households. These data show that, while the PRS has trebled in size since 1999, the increase has been much more dramatic for poor households than for non-poor households. More than 30% of children in poverty live in the PRS, which is more than three times the proportion of 20 years ago (although the rate of increase has slowed in the past five years). It is therefore not just the overall growth of the PRS which is striking but its changing role for young adults and children, especially those on low incomes. Existing survey data can provide a great deal of information on the situation in Scotland, but there are several problems and barriers to its use, as Mark Livingston went on to discuss.

Mark began by outlining the collaboration between the Scottish Parliament Information Centre (SPICe), CaCHE and UBDC, which aims to build a framework for monitoring the PRS and reviewing recent policy reforms. Among the board aims of the 2016 Act, Mark highlighted both the intention to increase the security of tenure for tenants and to restrict unreasonable in-tenancy rent increases, but he noted the limitations of existing data for measuring the impact and monitoring the progress of this legislation. There is a lack of information on landlords, submarkets and poor data on rents but Mark listed a number of methods and data sources that might be used to measure changes in, for example, tenure security, as well as Zoopla data which can be used to measure mean and median monthly rents. Lastly, and importantly, Mark highlighted the data that is collected but not currently available. In particular, landlord registration data which potentially have huge value in terms of (near) full market coverage and include scope to collect additional data (e.g. size of a property, rent, etc.), but are currently not being shared for legal and practical reasons.

Second, Susan Aktemel spoke about the positive role that the PRS can play for disadvantaged households. Susan, Director of Homes for Good, outlined the aims of Scotland’s first social enterprise letting agency which include raising quality standards and increasing access to quality homes for people on low incomes. Their commitment to people on lower incomes and local housing allowance (LHA) tenants is reflected in the tenancy support they offer. This support includes in-house tenancy support officers who can help with management of benefits, assist with applications and work with tenants on their wellbeing. To date, Homes for Good has bought and renovated 191 homes across 6 local authorities, 95% of their tenants are on low incomes or in receipt of benefits, and they have low rent arrears and high tenancy sustainment rates. There are plans for a further 300 homes by 2022.

Third, Andrew Bruce of Scottish Futures Trust spoke about the role of Build to Rent (BTR) in the PRS. Young people today are less likely (or eligible) to own their own home or live in the social rented sector than in the past, so, he noted, generation rent is a real thing! He showed that institutional investment in the PRS (measured in market value (£billions)) is minuscule compared to that in commercial property; instead retail investors (Buy to Let) continue to dominate the market. However, echoing Christine Whitehead’s observations, there is growing interest in BTR among institutional investors. Among the wider benefits of BTR, Andrew noted the potential for economic development through faster delivery of housing stock, retaining graduates and attracting employers; high quality, well-managed accommodation of long-term rent; and communities for the economically active. As this report from Rettie & Co. notes, uncertainties about Scotland’s future in the UK, and Brexit, have deterred some investors while others are attracted by demand and strong underlying investment fundamentals. The Scottish Government has also piloted a Rental Income Guarantee Scheme (RIGS) to help kick-start the BTR sector in Scotland by guaranteeing a substantial proportion of eligible investors’ initial rental income stream.

Finally, mid-market rent is an interesting new area for a growing number of housing associations who are competing successfully on quality and price with the traditional private rented sector as a result of the focus on key workers, the availability of capital grants and rent policies that initially sit around LHA level. The sector is doing well in Glasgow, and Tom Barclay, on behalf of Wheatley, argued that the sector offered much potential for affordable renting, but had to be properly segmented and the necessary market intelligence and business due diligence had to be maintained. Ken, who chaired this panel discussion, argued that the impacts of this innovation may flow back to the social housing element of provision as landlords learn valuable lessons from their market clients’ needs and requirements and this leads to more of a customer focus in the social sector. Ian Brennan from the Scottish Housing Regulator argued that they have a continuing interest in associations operating these types of subsidiaries, not least because a clever lawyer, usually quite rightly, can find a connection between the subsidiary business and the social objects of the parent housing association. If it affects the latter’s risks, the regulator understandably wishes the organisation to manage those risks effectively.

You can continue to follow our work on the PRS and other projects, as well as keep up with other news and events, by signing up for our newsletter. We now look forward to the 2nd Annual Scottish Housing Policy Conference. If you have ideas for future events that CaCHE might organise on housing policy in Scotland, or in other parts of the UK, do let us know.